February 24,  2010

Significant pluses and minuses
expected in next county budget

When County Executive Chris Coons goes before County Council in March to propose a budget for the coming fiscal year, his message will have a couple of proverbial good news-bad news scenarios.

It's a safe bet that he won't seek another increase in the property-tax rate. Even if it were not an election year -- terms of six of the 13 members of Council expire this year and Coons himself faces a titanic battle with implications far beyond Delaware when he goes up against Congressman Mike Castle vying to fill the remaining four years of Vice President Joe Biden's term in the U.S. Senate -- there almost certainly would not be the political will to impose a fourth increase in five years. One for next year would follow a 25% hike this year, 17.5% in fiscal 2008, and 5%, then the statutory limit, in fiscal 2007.

Without generation of some additional tax revenue, it will be difficult to maintain the current level of public services, especially considering that the county workforce already is stretched thin to cover vacancies in the authorized ranks. Then, too, there's the matter of whether to continue the pay cuts imposed on employees this fiscal year. While there was no specific 'sunset' provision in any of the legislation enacted to effect the cuts, they were labeled temporary, which was widely believed to mean the former pay scales would be restored after a year.

In a broader context, some of dark clouds of the so-called Great Recession show signs of parting. New Castle County is expected to soon begin sharing in an economic recovery which appears to be slowly gaining momentum. Fisker Motors' reopening of the General Motors plant, possible sale of the Valero refinery and the expansion of Aberdeen Proving Ground in nearby Maryland all bode well for a larger and firmer tax base.  Shorter term, the county's Financial Advisory Council was told at its recent meeting that the real estate transfer tax appears to be, at least, stabilizing and, when combined with higher fees, has inspired a $1.5 million upward adjustment in projected fiscal 2010 revenue. The gain is slightly less than 1% over the $154 million anticipated when the budget was adopted last May.

The same forecast, however, looks for an $11.8 million deficit in the general fund budget for fiscal 2011 on top of $2.8 million this year. Because state and local budgets are required by law to be balanced, that requires dipping into the non-emergency reserve to finance the shortfalls. The reserve is now expected to be gone early into the fiscal year which begins in July, 2012. Absent any significant structural change in the county revenue stream and only conservative increases in spending, the shortfall would grow to $95.7 million over the next five years.

Although the transfer tax currently is running at a pace which would put it $1 million ahead of budget, Russ Morris, of the county finance department, told the advisory council that mostly reflects completion of four large transactions. Similarly, he added, one major project, proposed development of Barley Mill Plaza, was responsible for most of a significant increase in fee revenue. On the spending side of the ledger, he said, the lower cost of utilities and gasoline, along with savings as a result of a 10% reduction in the workforce, are driving spending down $2.4 million under budget.

Offsetting the perceived improvement in General Fund revenue, Morris reported, is a projected $2.2 million drop in fees for sanitary sewer service as a result of lower water consumption. With a $1.9 million shortfall expected in the sewer fund this year and $3.2 million next, its reserve would be exhausted during fiscal 2012 if nothing is done to reverse that situation. Fees account for about 85% of sewer fund revenue.

Although they won't receive Coons's budget proposal until Mar. 16 and not get into department-by-department details until a round of budget hearings, County Council members at their finance committee meeting on Feb. 23 talked in a somber vein about the fiscal situation. The discussion was inspired by Timothy Sheldon's recounting a chance conversation during a recent personal trip with a county councilman in Florida. His counterpart, Sheldon said, was amazed at the limitations within which county governments operate in Delaware. Facetiously or not, he suggested simply letting the money run out with the assurance that state government would thus be forced to come to the rescue, Sheldon said.

While no one at the meeting here advocated following that advice, there was a general consensus that the General Assembly either does not recognize the seriousness of the situation in New Castle County or is unwilling to grant some relief in ways that would have little or no impact on state revenue, which admittedly also is falling short as a result of the ailing national and local economies.

Several Council members were especially critical of state representatives and senators whose New Castle constituencies are the same people the County Council members represent. Many, if not most, residents are unable to differentiate between "what we can do and what we can't do" under state law, George Smiley said.

In particular, John Cartier said, the county should be allowed to take the same cut from the state hotel tax which the city of Wilmington receives. Similarly, it was said, the Delaware counties should be able to share the revenue from casino gambling, which presently is limited to one venue in each of the three counties -- Delaware Park, Dover Downs and Harrington Raceway.

On the other hand, it appears that a state constitutional amendment now in process will transfer from county to state jurisdiction two revenue-generating offices -- recorder of deeds and register of wills. County government was required this year to take responsibility for and pay for dog control. Presently at risk is the amount of state reimbursement for paramedic services.

Chief of staff Nicole Majeski told the meeting that the Coons administration is continuing to press for the revenue diversification is has been seeking since coming into office five years ago. However, she said, "the response we are getting from Dover this session is that they're not interested in raising taxes or fees." She indicated that holds irrespective of which level of government levies or collects them.

2010. All rights reserved.